4VVV Ltd and the (2) to (435) Claimants listed in Schedule 1 to the Claim Form v Nicholas Spence

Hearing dates: 15–18, 23–25, 29–30 April, 1 – 2 May, 20–23 May and 6, 10–13 June 2024

Further submissions: 25 and 31 July 2024

Draft Judgment Circulated: 23 August 2024

Approved Judgment

I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

THE HONOURABLE Mr Justice Foxton

This judgment was handed down by the judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be Friday 27 September 2024 at 10:30am.

The Honourable

A INTRODUCTION

A(1) The Claim in Outline

In 1863, Victorian entrepreneurs decided to capitalise on the success of Charles Kingsley's 1855 novel Westward Ho! by building a hotel and holiday villa near Northern Burrows on the North Devon coast. Their prospectus asserted:

“The want of such accommodation has long been felt, and as no attempt to supply it has hitherto been made by individuals, it is deemed to be a legitimate project to be undertaken by a Company. The salubrity and beauty of the North of Devon have long been known and appreciated. Sir James Clark has placed it in the highest position for health-giving qualities; and the recent publication of Professor Kingsley's ‘Westward Ho!’ has excited increased public attention to the western part, more especially, of this romantic and beautiful coast. Nothing but a want of accommodation for visitors has hitherto prevented its being the resort of families seeking the advantages of sea bathing, combined with the invigorating breezes of the Atlantic….”

(The Northern Burrows Hotel Prospectus, Westward Ho! History Society, westwardhohistory.co.uk)

This case arises from investments made by the 435 claimants in holiday properties in Westward Ho! and Ilfracombe, and in student accommodation across the country, in reliance on what they allege were dishonest misrepresentations in investment prospectuses which were even more alluring than their 1863 predecessor. They seek:

i) damages for deceit and unlawful means conspiracy against two individuals and a number of companies;

ii) rescission of certain of the purchase contracts on the basis that they were induced by fraudulent misrepresentation;

iii) a declaration that certain investments are unenforceable under s.26 of the Financial Services and Markets Act 2000 (“ FSMA”) on the basis that they constituted unauthorised collective investment schemes, and consequential relief in respect of those investments (including recovery of all amounts paid and compensation).

The action has proceeded by way of a phased trial, with this first phase determining a number of common issues, together with the claims of ten of the Claimants, referred to as “ the Lead Claimants”.

The Defendants comprise:

i) Mr Nicholas Spence, a director of the 8 ^th to 11 ^th Defendants and a former director of the 6 ^th Defendant Green Parks Holdings Ltd which was the 7 ^th Defendant until it entered administration and of and A1 Alpha (Leicester) Ltd ( A1 Alpha), a key company in the relevant events.

ii) Mr Derek Kewley, a director of the 8 ^th to 11 ^th Defendants and a former director of the 6 ^th Defendant and A1 Alpha.

iii) The Sixth to Eleventh Defendants (referred to with A1 Alpha as the Alpha Companies and, together with Mr Spence and Mr Kewley, the Alpha Defendants and, with other companies in the same ultimate ownership, the Alpha Group) comprise companies which sold the investment properties, were also tenants of those properties under underleases and or managed many of the sites.

iv) The Twelfth and Thirteenth Defendants ( the Tuscola Entities) who have been joined to the proceedings in their capacity as successors in title to the freehold title to certain properties, and whose position may be relevant to some of the claims for rescission advanced in the case. It was agreed at the PTR that any claims for rescission in respect of leaseholds of which the Tuscola Entities are freeholders would be addressed at a subsequent hearing after judgment in this trial, and the Tuscola Entities have not played an active part in this phase of the trial.

The Claimants have reached a settlement with the Third Defendant, Mr Andrew Crump, and the Fifth Defendant, and the Claimants have entered judgment in default against the Fourth Defendant.

The Witness Evidence

I heard evidence from or on behalf of all of the Lead Claimants (five of whom are investment companies):

i) Mr Andreas Alonefetis, the principal of AA Azure Yachting Limited ( “AA Azure”) who invested in two Westbeach units, two rooms in the Q Studios student development in Stoke and a unit in the Ilfracombe development.

ii) Mr Alexander Longman, who invested in two Westbeach units.

iii) Mr Chukwuebuka Ofor who invested in a room in the Park Lane House development in Sunderland.

iv) Mr Hitesh Vyas who invested in a unit in the Ilfracombe development.

v) Dr Alice Hudson-Peacock, the principal of Hudson-Peacock Investments Ltd ( “HPIL”) who invested in the Scholar's Court student development in Bradford.

vi) Mr Omar El-Quqa, the principal of Lotus Properties Real Estate Company Ltd ( “Lotus”), who invested in ten properties: six units in the Norfolk Street student development in Sunderland, and four units in the Tudor Studios development in Leicester.

vii) Mr Paul Simpson, the principal of Magic Box Properties Two Limited ( “Magic Box”), who invested in one unit in a student development at the Old Wesleyan Chapel in Ambleside.

viii) Mr Oliver Whitefield, who invested in one unit in the Westbeach development.

ix) Mr and Mrs Whitton, who invested in one unit in The Box, one in Scholar's Village, one in Primrose Hill, by way of purchases from original investors rather than from the Alpha Group, two units in the Foundry and one unit in Ilfracombe.

x) Mr Adam Cayley of Wolfe Solutions Ltd ( “Wolfe”) who invested in two units at Westbeach, one in Ambleside and two at Ilfracombe.

All of the Lead Claimant witnesses were honest (and it is right to record that there was no suggestion otherwise). Some of the witnesses clearly harboured strong feelings about what has proved to be a very unfortunate investment experience. Their evidence was tested in cross-examination which was sensitively conducted by Mr Collings KC and Ms Page in a manner which avoided adding insult to injury, making this one of the many occasions where courtesy and a good strategy aligned in commercial litigation. It is important to test their evidence of reliance objectively, with the benefit of any presumptions which arise in their favour. I return to this issue, and address their particular circumstances so far as relevant to that issue, below.

In the event, the principal witness called by the Alpha Defendants was Mr Derek Kewley, currently a director of the Eighth to Eleventh Defendants, and formerly a director of the Sixth and Seventh Defendants:

i) He became involved in providing student accommodation after suffering catastrophic injuries in a car crash. Having developed a portfolio of properties in Stockton-on-Tees, and raising funding for these ventures, he established himself as a mortgage-broker, setting up his own company called Tees Valley Finance. It was in that capacity that he and Mr Spence first came into contact in 2007, when Mr Spence was seeking to raise development finance for the Westbeach development.

ii) Mr Kewley was a clever and confident witness who was fully familiar with the trial documents – something which is no more a cause for criticism in a witness than it would be for the advocate cross-examining him. However, there were a number of occasions, when faced with difficult questions, he would take refuge in stock responses rather than give an answer, and he was generally unwilling to accept poor behaviour on his part when documents put to him unequivocally established this. His evidence was carefully tested by Mr Saoul KC over a number of days and by reference to a large volume of contemporary documents. It was clear to me that he was a financially savvy business operator, who was well-placed both from experience and instinct to understand the implications of the investor propositions which the Alpha Defendants were offering and to evaluate them. He did not strike me as in any way a dewy-eyed optimist.

iii) It is clear from the contemporaneous communications that there were numerous occasions when Mr Kewley was happy to mislead others to advance his own and Mr Spence's financial interests if he thought he could get away with it. When he did “come clean” on certain points, it was by necessity rather than inclination. For that reason, I have approached his oral and statement evidence with caution. The particular issues which underpin this finding are set out in the chronological narrative below. It remains important, however, to recognise that a willingness to mislead in some contexts (something particularly apparent towards the end of this unhappy story, but present for most of it) does not of itself establish that a defendant has acted dishonestly in other contexts or at earlier points in time (cf. the well-known Luca...